US President Joe Biden is keenly aware that the economy is the main issue for voters ahead of the midterm elections on November 8. On Wednesday, the Democrat announced action against abusive charges, or “junk fees” as he called them, that banks and other companies slap on their clients for a variety of reasons. Biden said the move is meant “to put more money in the pockets of the middle-income and working-class Americans, to hold big corporations accountable.”
In his speech at the White House, Biden said his government is particularly targeting surprise overdraft fees and depositor fees on bounced checks that are being charged by banks, which “are likely unfair and unlawful under existing law” according to the Consumer Financial Protection Bureau (CFPB). This agency issued new guidance to that effect on Wednesday. “Americans are willing to pay for legitimate services at a competitive price, but are frustrated when they are hit with junk fees for unexpected or unwanted services that have no value to them,” said CFPB Director Rohit Chopra. “We are providing guidance on existing law that will help law-abiding businesses seeking to fairly compete and the families they serve.”
Biden gave a graphic example of how these fees can impact a family. “Imagine this: Your child outgrows his bicycle, and you decide to sell it online, and someone pays you a check. Pays you 30 bucks for the bicycle or something. Days later, that check that you got paid with, that you deposited into your bank, it bounces. You didn’t know it was bad, but you get charged 15 bucks. You get charged 15 bucks. It’s wrong. It’s ridiculous. It’s unfair. And my administration is making clear today it’s illegal as well.“
The president also described the impact of surprise overdraft fees. “You pay a bill, and you double check your bank account to make sure, before you write the check, that you have enough in your account to cover it. You’ve gotten the money, so you go ahead and you pay. Then it turns out your balance wasn’t up to date because your bank was slow in processing other charges. And by the time the bank gets around to settling the transaction, you’ve overdrawn your account. You’re charged an overdraft fee that runs around $35 each time. It’s not your fault. The bank screwed up. You didn’t; the bank did. You had a positive balance when you paid the bill. It’s just simply wrong. And today, my administration is making clear it’s also illegal.”
Biden asserted that these new measures will save consumers over $1 billion a year. The CFPB agency will also develop rules and guidance targeting credit card late fees and other banking fees “that cost Americans $24 billion dollars a year [...] And we’re just getting started. There are tens of billions of dollars in other junk fees across the economy, and I’ve directed my administration to reduce or eliminate them.“
Although Biden took advantage of his Wednesday speech to announce the measure, the CFPB in fact launched its initiative to scrutinize bank fees in January, and the agency said that some banks have already “started to compete more when it comes to fees. Earlier this year multiple banks announced they were eliminating overdraft fees or updating their policies to be more consumer friendly.” The CFPB estimates these changes will save consumers $3 billion.
The Biden administration is also targeting abusive processing and termination fees charged by airlines, hotels, cable TV and internet providers, and demanding more transparency.